Modern pension plans are the future
The CAAT Pension Plan is a modern Defined Benefit (DB) pension plan. This means that it’s designed and administered to provide secure, lifetime retirement income, based on appropriate contribution rates.
What do we mean by modern DB? What’s different about these types of pension plans compared to those of prior generations?
Historically, DB plans were the responsibility of an individual employer. Employers would make the decisions, bear the risks, and traditionally make most of the contributions to the pension plan. This worked okay when Canada was younger and growing at a fast pace. For most members, promises made by employers would be kept.
As times and conditions changed this model wasn’t an ideal situation because employees had little say in their pensions, and when times turned difficult the pension benefits or the health of these plans could be at risk.
Today, most employers didn’t want to have to worry about running large and potentially risky pensions alongside running their businesses.
Modern DB plans, such as the CAAT Pension Plan, on the other hand, enable governance by employers and members together, with shared risk and cost. They are an efficient way to help members build a secure lifetime pension. The CAAT Plan has evolved with the times and is now what most experts agree is the model of a modern pension plan. The five characteristics of a modern DB plan include:
- Jointly sponsored: Employees and employers share in all decisions about contributions and benefits, and share costs and risks 50/50.
- Multiple employers: This allows for participation across an industry and the mobility of pensions to be transferred to consolidate pension benefits. It’s more efficient and sustainable than single-employer pension plans.
- Lifetime pension: It’s a benefit members can count on based on a formula so they can accurately predict their financial future.
- Not for profit: It’s an efficient, low-cost system where expenditures are minimized so there is more money to pay pensions rather than fees and overhead.
- Flexible: Early retirement options, disability provisions, and inflation protection are examples of individual protection features that help members when life doesn’t go according to plan.
At the CAAT Pension Plan, we have built a modern DB plan with $8.6 billion in net assets, offered at 38 employers. The Plan is 118% funded – meaning for every dollar of pension promised to members, there is $1.18 dedicated to stand behind it.
Members and employers of modern DB pension plans, like the CAAT Plan, should take great pride in knowing that they have secure retirement income through an efficient and effective pension plan. Members should take comfort in knowing their pension plan is focused on improving their financial future. The financial security of members will contribute to a healthy Canada in the future as we continue to age and evolve.
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